Author Archive: Michael Foster

Let’s set aside the noise and talk about the one thing that matters most in a volatile market like this: earnings.

According to recent FactSet data, analysts expect negative earnings growth in the first quarter of 2020. That’s no surprise, given the battering the coronavirus is laying on some sectors of the economy.

But even so, the projected decline as I write was still reasonable: just 0.1%. Things can still change, of course, but it’s important to note that this modest decline comes after a fourth quarter in which earnings grew following three straight quarters of declines—and despite analyst expectations of a 1.7% drop.… Read more

Last Thursday, we took a close look at how closed-end funds (CEFs) holding municipal bonds—issued by states and cities to fund infrastructure projects—can help stabilize your portfolio in times like these.

Today we’re going to dig deeper and put some numbers behind how these CEFs can do even more, including handing you a dividend that’s double what you’d get on stocks—and these payouts are tax-free, to boot!

First, here’s what “munis” did during the selloff in the last week of February:

Muni Bonds Hold the Line—Literally

When stocks plummeted, munis were fine. And why wouldn’t they be? As senior government debts, municipal bonds have strict regulations and restrictions that make them less risky than stocks.… Read more

When the market is selling off, it’s easy to panic as big losses rack up in your account.

Here’s the thing, though: going to cash, and fully exposing yourself to inflation, is a guaranteed way to lose. It’s doubly sad to see first-level investors doing this when there’s a time-tested way to survive meltdowns, keep your income stream intact and cut your portfolio’s volatility.

It doesn’t involve panic selling. Instead, it revolves around three simple rules: diversify, be patient and keep a big income stream. Let’s walk through each of these.

1. Diversify

The first key to surviving a meltdown is to be in several markets at once.… Read more

Let’s be honest: it’s hard not to be rattled by last week’s double-digit drop in the S&P 500.

And it’s true that if the coronavirus continues to spread, we could see more people holed up in their homes, meaning less spending and less economic activity. Some analysts are already calling for a coronavirus-driven recession.

But let’s not forget that American economic data looks very good right now. The Federal Reserve sees GDP rising a healthy 2.6% in the first quarter of 2020, even accounting for the coronavirus’s impacts. Personal incomes and spending are also rising at healthy levels, so there’s no reason to panic.… Read more

What are we income-seekers to do after this latest pullback? Buy more? Sit on the sidelines?

It’s the question everyone’s asking. And while no one can predict the future, the past gives us some solid hints at what might be ahead, and the moves that make the most sense for our income portfolios (including a certain 7%-paying fund that’s more than worth your attention now).

To see what I’m getting at, let’s rewind to 2002. Then, like now, we were facing the potential of a pandemic: SARS in that case. There was other dreadful news, too: the dot-com bubble had just burst.… Read more

Flipping through my stock screener earlier this week, I ran across two of the best examples of bubbles-in-the-making I’ve ever seen:

Looking to Lose Money? Invest Here.

Those would be Tesla (TSLA), in blue above, and Virgin Galactic (SPCE), in orange.

Bubbles, of course, are nothing new: Nobel Prize–winning economist Robert Shiller explained them in his 2000 book, aptly titled Irrational Exuberance:

“Errors of human judgment can infect even the smartest people, thanks to overconfidence, lack of attention to details and excessive trust in the judgments of others, stemming from a failure to understand that others are not making independent judgments but are themselves following still others—the blind leading the blind.”… Read more

A proven recession indicator just went off again—only nine months after its last warning. And how have the markets and the media responded?

Crickets.

The funny thing is that this isn’t a bad news story for us. Because there’s a way we can profit from this signal of tougher times to come. I know that sounds counterintuitive, but stick with me for a moment and I’ll introduce you to a fund that protects—and actually grows—its 6.6% income stream when markets panic.

Before we get to that, let’s look at that recession indicator and tease out what it’s telling us.… Read more

There’s a way you can buy into today’s healthy real estate market without paying full price. In fact, you can get in for a lot less—I’m talking 16% below market value.

This may sound impossible, but it’s easy to do with closed-end funds (CEFs). That’s because there’s a CEF that invests only in real estate, and its market price is actually 16% lower than the value of its portfolio of assets. There’s much more to this fund, too. Not only does it hold a diversified real estate portfolio, but it also pays out a 5.9% dividend that’s risen 73% in the last decade. … Read more

With coronavirus spreading and China’s economy being shut off from the rest of the world, you’re right to ask one (or both) of the following questions:

Is this rally justifiable? Is it still a good time to buy in?  

Profits (and Dividends), Not Fear

Here’s the good news: this market is rising on fundamentals, and ignoring overwrought media headlines that will eventually be forgotten. So yes, now is a good time to buy in. And contrary to what most people think, there’s still a good shot at high (I’m talking 7.8%+) dividends out there for us, too. Those payouts are in a corner of the market too many people never think to check.… Read more

If you’re like most income investors, you stop in your tracks when you spot a massive payout—like 16% or more. A yield like that means you’re doubling the market’s historical annual return in dividends alone.

What’s not to like?

Too bad dividends that big are almost always warning signs. That’s the case with the two stocks we’re going to dive into today. You’ll want to avoid their “siren song” 16%+ payouts now—or sell if they’re taking up space in your portfolio.

When the Market and Reality Part Ways

This story actually starts more than a decade ago—in the middle of the collapse of 2008.… Read more